Gulf Attacks Drive Oil Volatility

The benchmark price of oil ultimately ended the day higher as escalating attacks in the Persian Gulf caused long-term damage to major energy facilities. Natural gas jumped.

Thursday’s oil session was marked by more volatility, as the price swings sent some speculators to the sidelines. Brent rose as much as 11%, to top $119.13 a barrel, before easing back from the bulk of those gains to settle up 1.2% at $108.65. Prices then drifted lower in after-market trading.

An Iranian missile strike on the Ras Laffan complex in Qatar caused extensive damage to the world’s largest liquefied natural gas plant. Two facilities that produce 17% of the country’s LNG exports, or about 13 million tons a year, were affected and it will take three to five years to repair them, QatarEnergy Chief Executive Officer Saad al-Kaabi told Reuters.

European gas futures surged as much as 35% to more than double their pre-war level. Fuel prices also climbed, underscoring the wider inflationary risks from the conflict.

But ultimately, Thursday’s oil trading was marked by choppiness. Speculators are parsing every geopolitical headline for indications on how long the war will last and whether tensions will continue to escalate from here.

Traders pointed to extreme volatility curbing activity, with volumes trending lower.

“Crude is on another roller coaster today,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. “Prices have retraced on de-escalation messaging. We’re seeing a clear pattern of strength during Asia hours and pullbacks in US trading as policymakers signal potential timelines and response options.”

During US hours, investors weighed comments from US President Donald Trump and Treasury Secretary Scott Bessent.

Speaking at the White House, Trump said he’s not putting troops anywhere when asked about sending ground forces to the Middle East. Meanwhile, Bessent said it’s likely Iran’s regime will probably collapse within itself. US spy chief Tulsi Gabbard acknowledged the US and Israel have different goals for their joint military campaign in Iran.

Later Thursday, the International Energy Agency released details on emergency crude oil commitments by member nations. Japan, Canada and South Korea will be among the biggest contributors to the broad release of stockpiles.

Meanwhile, oil loadings on Saudi Arabia’s west coast, a vital export route for the country amid the closure of the Strait of Hormuz, were briefly halted by an attack. A gas facility in Abu Dhabi was shut after being hit by falling debris from an intercepted strike and two oil refineries in Kuwait were set ablaze by drones.

The attack on Qatar in particular raises the specter of long-term inflationary pressure in energy prices resulting from the US and Israel’s war on Iran. While oil and gas flows through the Strait of Hormuz could resume once the conflict ends, severe damage to any production facilities in the region will have a lasting impact on the global economy.

“The latest wave of attacks on energy infrastructure in the Gulf just underpins the dire supply outlook from the region,” said Florence Schmit, energy strategist at Rabobank. The world now faces an LNG shortage, she said.

Trump responded to the attack on Qatar by pressing for a de-escalation. He said again on Thursday that he told Israel not to attack Iranian oil and gas fields. Strikes on Iran’s South Pars gas field had prompted Tehran’s retaliation against Qatar. However, he also threatened to “massively blow up the entirety” of South Pars if Iran targets Qatar’s LNG facilities again.

Tehran’s response to Israel’s assault on South Pars “is underway and not yet complete,” the semi-official Iranian Students’ News Agency cited a military spokesman as saying on Thursday.

Bessent said the US will continue to take steps to add supplies to oil markets. That could include removing sanctions from Iranian crude already in tankers on the water, and a new unilateral release of emergency reserves, he said in an interview with Fox Business. He reiterated that the US isn’t intervening in derivatives markets.

Global Impact

QatarEnergy said several of the LNG facilities inside its Ras Laffan Industrial City were attacked by missiles, “causing sizable fires and extensive further damage.” Shipments from the LNG plant had already been halted earlier this month due to the war.

While Asian countries buy most of the LNG shipped from the Middle East, any prolonged disruption to flows would shrink the global supply balance, keeping prices elevated worldwide. Natural gas futures in the US, also a major exporter of LNG, rose as much as 6.7% on Thursday, as did shares of American producers of the fuel.

Shell Plc’s Pearl gas-to-liquids plant also sustained damage, the company said. A fire has been extinguished and the facility is in a “safe state” and the extent of the damage is being assessed, according to a statement.

The QatarEnergy CEO told Reuters that the attack won’t just affect the country’s exports of LNG. Shipments of a light oil called condensate will be reduced by about 24%, liquefied petroleum gas will fall 13%, helium by 14%, and naphtha and sulfur by 6%. The damaged units cost about $26 billion to build and generated about $20 billion in annual revenue, he said.

In Kuwait, two oil refineries, Mina Al-Ahmadi and Mina Abdullah, were struck by drones, causing fires that have since been extinguished. One of the two facilities is operating normally following the attack, while the other was already shut in due to curtailed production, Bloomberg reported.

A drone fell on Saudi Arabia’s Samref refinery in Yanbu on the western coast, a facility jointly owned by Aramco and Exxon Mobil Corp. A ballistic missile heading toward the port in the region, currently a vital exit route for Saudi Arabia’s oil exports, was intercepted, the kingdom’s ministry of defense said.

Yanbu is critical for Saudi Arabia and the global oil market and Thursday’s attacks mark the first time in this war that it has been targeted by Iran. The kingdom has boosted crude exports from the port after the blockage of the Strait of Hormuz, while Samref is one of the plants the company is relying on to provide fuels like diesel to Europe.

Aramco declined to comment on the status of both the refinery and the port.

Oil has surged more than 50% since the start of the war. More intensive targeting of upstream energy infrastructure, either in Iran or across the wider region, could push prices even higher, according to Rystad Energy A/S.

Disruptions to key infrastructure such as the port of Yanbu could remove 5 million to 6 million barrels a day from the market and potentially push oil prices to $150 or higher, Rystad’s Vice President Aditya Saraswat said in a note on Thursday.